IOC seeks fuel price hike, politics weighs

Indian Oil Corp, the country's biggest fuel retailer, said on Tuesday there was a need to raise petrol prices, a day after the budget failed to announce any measures to stem revenue losses of state oil firms.
Petrol prices in India are market-linked, but diesel, cooking gas and kerosene rates are set by the government, which partly compensates state oil firms for their losses when global crude oil prices increase.
Raising fuel prices is politically sensitive in India, with the government struggling to balance maintaining growth momentum and reining in inflation, among the highest of major Asian economies.
The ruling coalition also faces crucial state elections over the next year which also make it unattractive to raise fuel prices.
"I hope the (global crude oil) prices will come down," IOC Finance Director S.V. Narasimhan said.
Narasimhan refused to say by when the company could raise petrol prices. IOC has raised petrol prices at least nine times since state control on its pricing was lifted last June. The last hike was on Jan. 16.
IOC's daily revenue loss on fuel sales now stood at 2.16 billion rupees ($47.72 million), Narasimhan said, adding a desired increase in petrol prices would be 3.5-4 rupees a litre.
Petrol currently sells in Delhi for about 58 rupees a litre.
Oil firms had expected Monday's budget to at least cut customs and excise duties to cushion them against rising global oil prices, as continued unrest in the Middle East and North Africa threatens to further reduce crude supplies, despite Saudi Arabia ramping up output.
But the lack of support in the budget for oil firms has also fed speculation that a ministerial panel on fuel pricing will take up the issue of hiking prices soon.
While the oil and finance ministries have appeared to support an increase in prices, a final decision is often a political one that takes into account its impact on the support bases of the ruling Congress party and its government allies.
Gasoline and diesel have weights of 1.09 percent and 4.67 percent, respectively, in the wholesale price index (WPI), India's main inflation measure, and raising fuel prices has a knock-on effect as farmers and manufacturers pass costs along.
Narasimhan said current revenue loss on diesel stood at 11.16 rupees a litre, while on kerosene the loss is 23.55 rupees a liter. The loss on a cylinder of 14.2 kg cooking gas cylinder is 298 rupees.